ENGG 209 Chapter Notes - Chapter 9: Mansfield, Cash Flow, The Thirteen Chairs
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12 Dec 2016
School
Department
Course
Professor
Taxation
Corporate Income Taxes
Federal (%)
Provincial (%)
Total (%)
General Business
15
11 - 16
26 - 31
Manufacturing/Processing
15
5 - 16
20 - 31
Small Business (Taxable
income < 500,00)
10.5
0 - 8
10.5 - 18.5
*In all cases, federal income tax on first 500,000 is 10.5%
Capital gains (Profits on buying and selling of assets) are 50% taxable (this does NOT mean the
tax rate is 50%)
Tax Treatment of Revenues (R) and Cash Expenses (E)
t = effective tax rate
Taxable income = R – E
Income Tax = t(R – E)
Net Income = (1 – t)(R – E)
Tax Treatment of Non-Cash Expenses (i.e. CCA)
EXAMPLE: t = 40%
Without CCA
With CCA
Revenue
5500
5500
-Operating Costs
1500
1500
-CCA
N/A
1000
=Taxable Income
4000
3000
-Tax
1600
1200
=Net Income
2400
1800
+CCA
N/A
1000
=Cash Flow
2400
2800
Disposal Tax Effects (Asset Class Terminates)
Let
o P = Initial Cost
o S = Salvage Value
o Ud = U at disposal (book value)
o H = Disposal Tax Effect
If S < Ud
o H = t(Ud – S) > 0
o Additional tax has been paid, so there is a tax saving
If S = Ud
o H = 0